The following is a contributed article by Jigar Shah, president of Generate Capital and a 1996 graduate of the University of Illinois at Urbana-Champaign, and Jonah Messinger, a student pursuing both Bachelor of Science and Master of Engineering degrees at the university.
Pledges to achieve carbon neutrality have swept academia. This fall, the University of Illinois at Urbana-Champaign (UIUC) will finalize the 2020 Illinois Climate Action Plan (iCAP), the university’s guiding document for achieving carbon neutrality by 2050 — a commitment it made in 2008, alongside hundreds of U.S. universities, as part of the American College and University Presidents’ Climate Commitment.
That universities are making such commitments is good. But not all of these commitments are created equal. Many institutions are using carbon offsets and stand-alone renewable energy certificates, rather than taking steps to decarbonize operations. UIUC is doing more to that end than most. UIUC has successfully procured a wind-power purchase agreement, and — upon the completion of its second solar farm — will soon be third among U.S. universities in on-campus solar-power generation.
However, UIUC still lacks a comprehensive decarbonization strategy — one that would achieve true carbon neutrality. UIUC must resist carbon offsets and pursue a deep approach to erasing carbon emissions.
For example, the university’s current plan doesn’t adequately address the Abbott Power Plant, which remains a significant source of carbon emissions. Biogas from anaerobic digestion is a top candidate technology for decarbonizing the power plant. In addition, it fails to address the minimum $400 million in deferred maintenance costs the university has on the books — a number that is expected to balloon to $1.5 billion in the next decade.
One reason these steps toward legitimate decarbonization are ignored is they’re perceived to be prohibitively expensive. But that’s why the university’s mission to go carbon neutral must include one essential element that it currently does not — private partnerships and lease agreements with energy and infrastructure finance firms.
Such agreements can seem daunting. But the good news is that a model for university-scale energy decarbonization financing already exists. In 2017, fellow Big 10 school Ohio State University (OSU) approved a 50-year energy infrastructure lease agreement with Ohio State Energy Partners. Through the agreement, the Partners assumed ownership over operations of the university’s heating, cooling and power infrastructure units; provided the university with $1 billion in cash; and issued a $150 million commitment for academic programs. The university, in turn, pays annual service and cost-recovery fees.
Three years later, OSU has lowered energy procurement costs from $56 million to $51 million and aims to reduce campus energy-use intensity by 25% in the first ten years. The school has also exacted crucial infrastructure improvements, such as upgrades to LED lighting, installation of smart energy meters, and the soon-to-be-completed construction of a combined heat and power plant — which, in its first fiscal year of operation, is projected to reduce the campus' carbon emissions by 35%.
Pursuing a similar kind of partnership could provide the upfront capital UIUC needs for full-scale decarbonization efforts, which would otherwise require costly debt-financing.
UIUC must leverage private risk capital. Beyond decarbonization and sustainability investments, an influx of funds, on the order of a billion dollars, would help shore up the core educational mission of the university and prepare students for the significant job prospects from global decarbonization efforts.
UIUC has addressed many standard low-hanging fruit solutions. This is the next essential step.
There is sure to be opposition, mainly over fears of university job losses, unpredictable costs, and unchecked corporate power. However, UIUC maintains all the leverage. In a request for proposals, UIUC can stipulate requirements such as guaranteed jobs for university employees — as OSU did — retention of capital-project authority, performance-based annual payment structures, and more.
The institutional responsibility our universities bear regarding climate action is an awesome one. Universities must be at the forefront of technology deployment and innovation. It’s incumbent upon UIUC to lead on climate action, and the best way is to pursue private energy infrastructure lease agreements.
Treating climate action as a kind of public relations expense simply will not suffice.